This guidance note was prepared to assist Participants in project alliances to clarify the value proposition, or benefit, of using alliance agreements.
Governments1 seek to achieve a very broad range of social, environmental and economic objectives on behalf of the community. This normally results in an equally broad diversity of capital and infrastructure projects. There are a number of mature and emerging project delivery methodologies that can cater well to this project diversity on a 'fit-for-purpose' basis, the selection being on a careful and knowledgeable analysis of project characteristics and risks.
Increasingly, governments are using alliance contracting to procure significant infrastructure. A key value proposition of alliancing is that government entities trade-off their traditional contractual rights (under a 'risk transfer' contract) in exchange for Non-Owner Participants bringing to the project their 'good faith' in acting with the highest level of 'integrity' and making 'best-for-project' decisions. This is another important alliancing value proposition.
The alliancing contracting principles of 'no blame' and 'collective assumption of risk' have created new challenges in finding an insurance solution. Using traditional insurance policies in alliancing contracting could potentially create significant cover gaps, duplication of coverage and expose alliance partners to greater risk.
Agencies involved in alliancing contracting need to understand different insurance solutions and make sure that the legal position and the government's commercial exposure are transparent and understood.
Like all contracting methodologies, alliancing needs to also make continual improvements, and this guidance note aims to identify where alliance arrangements can be improved to further demonstrate their value to the government.
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1 1 Unless specifically stated, government or governments, refers to one or more of the Australian, state or territory governments.